I wrote the Inside Wall Street column at Business Week Magazine for 28 years, through December 30, 2009. It was one of the most influential market columns as it moved stocks that I highlighted each week. BW had a yearly ScoreCard Report that tracked the performance of the stocks I mentioned, and the results confirmed their positive impact..I also wrote two books: “<a href="http://www.amazon.com/Secrets-Street-Dark-Making-Money/dp/0070402566"Secrets of the Street, the Dark Side of Making Money,” published by McGraw-Hill in 1995, and “Gene Marcial’s Seven Commandments of Stock Investing,” published by FT Press in 2008. I resumed writing the “Inside Wall Street” column for AOL DailyFinance after Bloomberg acquired BW in December 2009. Subsequently, I moved the column to MSN.com after AOL merged with the Huffington Post. I then started writing for Forbes.com with a new column, “Street Beat,” in mid-April 2011, where I expect my readers will follow me.

Will Gilead Rebound Significantly And Lead The Biotechs Back To Higher Levels?

After its huge run-up in 2013 and earlier this year, the biotechnology group was headed towards a slowdown anyway, but the heavy pummeling that rapidly drove down shares of Gilead Sciences (GILD) this week helped to speed up the sector’s downward spin.

Gilead, which has been spearheading the biotech group’s advance in recent years, has now tumbled to $70 a share from its 52-week high of more than $84 in early March, mainly due to a recent Congressional inquiry that questioned the pricing of its hepatitis C drug, Sovaldi.

Biotech leaders such as Amgen (AMGN), Biogen Idec (BIIB) and Celgene (CELG) also came under heavy downward pressure after it became publicly known that the House Committee on Energy and Commerce had sent a letter last week to Gilead CEO Dr. John Martin asking Gilead to answer some questions on the pricing methodology it used on Sovaldi, which is priced at $84,000 for a 12-week regimen.

That quickly shook up shareholders, causing some big and small investors to bail out of the stock or sell some of their holdings. Nonetheless, Wall Street watchers of Gilead remained steadfast in their support of the major biopharmaceutical company that discovers, develops and commercializes treatments to fight viral and fungal infections, respiratory disorders, cardiovascular conditions, and cancer.

Most biotech analysts also assume that as much as Gilead’s stock’s rapid drop produced unintended negative consequences on the other biotech stocks, Gilead would also be able to power the sector to higher levels when its own stock recovers from its setback, which analysts believe should happen sooner than later.

“S&P Capital IQ reiterates its strong buy opinion on shares of Gilead Sciences and keep our price target of $116 and our 2014 earnings estimate of $3.72 a share,” says S&P analyst Jeffrey Loo, in a quick note to clients. And he also reiterated S&P’s “positive fundamental outlook” on the biotech industry. Says Loo: “We believe this Congressional inquiry will have little impact on biotech drug prices,” although it has raised concern among some investors.

With regard to the specific impact on Gilead, Loo believes the letter from the committee headed by Rep. Henry Waxman (D-California), “is more political posturing than anything and would result in little change to Sovaldi’s price as we believe its cost benefit is significant compared to the alternative of not taking the drug, and the potential of further liver damage.” But the analyst believes Gilead will make “some pricing concessions” for Medicaid patients.

As to the biotech sector, Loo says the industry’s “revenue and earnings growth rate, robust pipeline, and current valuation of about 0.8 times PEG remain attractive in spite of the sub-industry’s 74% rise last year.”

Analyst Ying Huang of Barclays Capital, who rates Gilead as overweight with a price target of $95 a share, isn’t surprised by the Congressional inquiry. “We believe Sovaldi offers significant benefit,” says Huang. And he argues that given the $84,000 cost of a full course of Sovaldi therapy and the prevalence of hepatitis C (3,2 million in the U.S.), he isn’t surprised by the inquiry. But he points out that Sovaldi offered a 90% cure rate in a Phase 3 trial, and that it would “save the system long-term costs associated with management of chronically infected hepatitis C patients.”

Moreover, Gilead is providing patient assistance to low-income and uninsured patients, notes the analyst. “In the context of cost benefit, we see Sovaldi’s pricing as consistent with the pricing range of most innovative therapies,” asserts Huang. Gilead’s hepatitis program is “broad and extensive and will likely lead to capturing a 70%-80% share of the HCV market.

Analyst Joel D. Sendek of investment firm Stifel, who rates Gilead as a buy with a price target of $92 a share, says the strong sales of Sovaldi supports his buy recommendation, and that any price weakness “is an ideal time” to buy the stock. He expects Gilead to eventually to take a dominant position in the hepatitis market similar to its dominance in the treatment of HIV, with about 85% of newly treated HIV patients in the U.S. placed in a regimen containing a Gilead compound.

Another bull on Gilead, Dr. Jim Birchenough, an analyst at BMO Capital Markets who rates the stock as outperform with a price target of $114 a share, says he doesn’t expect the Congressional panel’s briefing to have any impact on Sovaldi’s price or availability.

He argues that at its current price of $84,000, Sovaldi “is below the estimated cost of the prior standard therapy, with a much higher cure rate.” Dr. Birchenough says the feedback he got from Gilead suggests “very strong pharmacoeconomic analysis supporting Sovaldi’s pricing and patient support.”

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